Phl Economy seen to grow by 7% in Q2

The economy likely expanded by 6.5 percent to seven percent in the second quarter of the year, better than the first quarter expansion of 6.4 percent, according to the latest issue of the Market Call.

The Market Call is a regular research report published by First Metro Investment Corp. (FMIC) and the University of Asia & the Pacific. It said it expects full-year growth to hit six percent to seven percent this year on strong domestic demand, higher than the official forecast range for the year of five percent to six percent.

It noted that this view is supported by the 25 basis points policy rate cut of the Bangko Sentral ng Pilipinas (BSP) last month and the lower-than-expected budget gap in the first half which indicates that the government still has a lot of room to boost spending.

The government’s budget deficit in the first half of the year reached P34.482 billion, still way below the programmed ceiling of P109.341 billion.

In the report, FMIC and UA&P said an expected depreciation of the peso against the dollar in the second half of the year would boost spending among dependents of overseas Filipinos.

 “For the second half of the year, while the external sector may be weaker due to the lingering euro zone recession, domestic demand should be stronger since the Mational Government will likely incur an additional P180-billion deficit for the semester, while a slight peso depreciation will spur OFW-dependent spending. And so, we expect full-year GDP growth to be six percent to seven percent,” the report said.

It said agriculture is likely to expand 2.5 percent in the second quarter from one percent in the first three months of the year. This is expected to be complemented by rapid expansion in the manufacturing and construction sectors, it added.

On the fiscal side, the Market Call said the government’s slow spending is less of an issue now compared to last year when the economy grew by only 3.7 percent from 7.6 percent in 2010.

It said that the fiscal performance in the second quarter has been supportive of economic growth.

The government has set a budget deficit ceiling of P279 billion this year or 2.6 percent of gross domestic product (GDP), higher than the actual P197 billion recorded last year.-The Philippine Star (August 13, 2012)